Test your understanding of oligopoly theory with this Quizlet revision activity! There are eightteen terms in this quiz.
Abnormal profit: Any profit in excess of normal profit - also known as supernormal profit
Altruism: Disinterested and selfless concern for the well-being of others
Collusive oligopoly: When several large firms in an industry act to restrict price or output or share out the market
Concentration ratio: Measures the combined market share of threading firms in an industry
Duopoly: Market dominated by two rivals firms
Duopsony: Two major buyers of a good or service in a market
First mover advantage: When a business can develop a competitive advantage through early entry into an industry
Game theory: Study of how people behave in strategic situations
Heterogeneous goods: Products that are differentiated by design, packaging, functionality, performance.
Interdependence: When firms must take into account the likely reaction of rivals to changes in price and output
Joint profit maximisation: Price fixing with the aim of achieving an outcome associated with pure monopoly
Limit pricing: When a firm sets average revenue just low enough to discourage possible new entrants
Nash Equilibrium: Any situation where all agents in game are pursuing their best possible strategy given the strategies of all other participants
Non-price competition: Advertising and marketing strategies to increase demand and develop brand loyalty among consumers.
Pay-off matrix: A table used to simplify all of the possible outcomes of a strategic decision.
Price leadership: When other businesses accept price changes established by a dominant firm
Tacit collusion: When businesses co-operate but not formally, e.g. quiet or implied co-operation
Zero sum game: Where each participant's gain or loss is exactly balanced by losses or gains of the other participants.
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